Q1 Trends in Buenos Aires Real Estate

Latest prices, pozo investments and more.

Welcome Avatar! After the hefty increases in costs of living in Buenos Aires and Argentina in general, the impact on real estate prices is already noticeable. Let’s dig in.

Overview

The average sales price for a studio apartment (monoambiente) in Buenos Aires is now $97,248 (+1.1% vs February) , and in popular neighborhoods like Palermo and Recoleta you will see this closer to $100k or more.

On average, a two-room apartment of 50m2 is closer to $116.5k USD while the average 3-room, 70m2 apartment costs 160k USD.

Neighborhoods

When looking at the zoning heatmap for average price/m2, the northern corridor of the city (Recoleta, Palermo, Belgrano, Nuñez and Puerto Madero) saw an increase of 3% YoY. The northeastern corridor (Villa Crespo, Chacarita, etc), is closer to 2.3% YoY.

For the detailed prices per m2 per neighborhood, the bars look like this:

Just a few months ago, the second tier neighborhoods were still hovering around $2,000/m2, whereas now prices for these neighborhoods are closer to $2,300-2,500 per m2. Palermo is creeping closer to the $3,000/m2 mark, and Colegiales and Belgrano are prices just below that (closer to Palermo prices tend to be similar compared to Palermo).

Price variation in the last 12 months

As you can see, my neighborhood Villa Crespo is gentrifying hard, with the biggest YoY increase: 5.3%, just above the 5% in Palermo. Seems like buyers have finally figured out that walking to Palermo from Villa Crespo is only a few blocks. The amount of new construction is quite impressive.

The average price/m2 in the city is still hovering around $2,200/m2, and it is not likely to increase very much soon, except for some neighborhoods that are quickly gentrifying.

Looking at sales, we can definitely see a positive trend (+27%):

So now volume is genuinely picking up, although it will take some time to get back to the 2017-18 levels.

New Construction

Construction never stops in the city of Buenos Aires, and with the costs of living increasing in dollar terms (about 2x for many items and services compared to December), we can see an impressive increase in construction costs.

The strong 80% increase in construction costs in dollars in Argentina surpasses the 2018 record.

Prices are picking up after the jump in the official dollar rate, the subsequent stability of the exchange rate and the acceleration of inflation.

Construction cost in USD

Measured at the blue dollar rate, the cost per salable m2 reached $1,318.82 dollars and the total value to be invested in the construction of the typical building was slightly above one million dollars.

The construction cost in March, measured in nominal dollars, was the highest recorded since August 2008 (starting month of the series) and exceeded the highest level until then in mid-2018 by almost 11%.

This means property prices are still very low right now and will increase more rapidly than expected.

To Pozo or not to Pozo?

The fact that construction costs are becoming more expensive in dollar terms AND in peso terms, means that this can seriously impact the final price you end up paying for a property bought in installments from a developer.

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If you want to know what pozo developments are and how to invest in them, read more about here:

Currency Arbitrage for Real Estate in Argentina

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I am currently invested in 2 pozo developments, so I can very clearly see the difference:

1. Pozo in fixed USD installments — this was a great call, 80 installments without interest, at a fixed USD installment per month, payable abroad. This was a unique financing opportunity with the developer, most developers will only allow 18 to 36 installments, for however long construction lasts. This arrangement goes well past the construction due date, meaning that the finished units will pay for at least 50-60% of the monthly installments once I set them up as STRs. Final price in USD I end up paying for these units does not change and is fixed.

2. Pozo in pesos at monthly adjusted installments at the CAC rate — these are hurting at the moment. As the final sales price is pesified after the initial downpayment in dollars, these installments in pesos go up according to the increase in construction costs (CAC rate). This is a 5-8% MoM at the moment, while at the same time, the peso is strengthening against the dollar (went from $1,350 at the peak to $960 now). So if nothing changes, the apartment will cost significantly more in dollars at the end.

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Autist note: you can find some additional articles below that shed some more light on Argentina’s real estate market:

Buying property in Argentina - Part 1

Farmland & Ranching in Argentina

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Conclusion

Overall, there is positive price movements in Buenos Aires. Construction costs are at an all time high in dollar terms and this will start reflecting in property prices, which will have to increase.

Sales volume is picking up as well.

With regards to pozo investments, it really depends on the kind of financing you can get to see if it is interesting at the moment or not. Experience tells us that as soon as the Milei government unifies exchange rates, the dollar should go up again, which means if you time that correctly, a pozo in pesos could suddenly be interesting again.

It is hard to time the market like that and my base case is that the additional dollars that are being paid right now for the pozo at the CAC rate, will be offset once rates are unified and the peso devalues faster (should be around June/July is my guess).

See you in the Jungle, anon!